As oil and gas for heating reach new records on the commodity market, latest estimates put the increase in the cost of domestic gas for heating and cooking at 40% this winter. Such large increase means a typical household in the UK is going to pay £400 more on average for heating and electricity on an annual basis.
With UK households already under pressure with higher costs of fuel and food and higher mortgage rates, the new increase will put additional pressure on struggling homeowners. The increase is far higher than analysts predicted recently.
It is estimated that the price hikes will be introduced during the summer months, when heating bills are not at top of people’s minds, to make them less controversial. Furthermore, it is likely that the price increases will be introduced in stages rather than as a single large increase.
The latest price increase will put additional pressure on the financial systems trying to put a lid on a growing risk of inflation. Large increases in the cost of energy and heating is most likely to put more pressure on unions to ask for pay rises further increasing inflationary pressure.
According to economists, a rise of 40% gas and electricity bills would add approximately 1% to the Retail Prices Index measure of inflation.
Centrica , owner of British Gas (with around 13 million customers in the UK) signalled last month that gas prices for customers could increase again in 2008, as it was being squeezed by rising wholesale prices. Platts, industry watchers, say that the wholesale price of gas has risen 74% since the start of the year, with gas to be supplied in winter 2008 hitting a record high last week